Staatsschulden

Archive for 31. Januar 2012

As I sat down on a Sunday afternoon to write this article, I reached out for inputs from my Twitter circle. I was taken aback by the number of tweets that talked of gloom and doom. Not a surprise though, as the prophets of doom outnumbered the congregation in Davos too. While enough has been said about what is wrong with the world and I agree with most of it, as I reflected on my five days at the World Economic Forum, something just did not add up.

Let me explain what I mean there – Imagine that you and I were on a ledge of a building that is on fire. I guess we have three options. Call for a fire brigade and hope it comes on time, take a risk and jump to safety or do nothing and simply shout for help in hope that someone will come and save us. As I looked around the attendees at Davos, many were indeed shouting for help, but I was in search for people who were “doing” something to save themselves and the building. Fortunately, I did find them in a good number and was able to see the outlines of a vivid rainbow on the Davos sky. Den Rest des Beitrags lesen »

The euro area crisis and debate over fiscal reform have led many observers to pray for salvation by a modern, European version of Alexander Hamilton. By this they generally mean someone capable of leading a movement for a robust fiscal union and implementing this vision (see for example McKinnon 2011). Europe has instead, they lament, a collection of leaders who are primarily responsive to divergent national electorates rather than engaged in building a pan-European political movement. Consequently, they despair, instead of transforming the fiscal architecture of the monetary union,1 European officials are now dithering over the details of a fiscal compact,2 which is little more than an uninspiring upgrade of the Stability and Growth Pact. Den Rest des Beitrags lesen »

There has been relative calm in the EZ crisis since December last year, when the ECB announced a three-year long term refinancing operation (LTRO) and a sharp widening of its collateral requirements. Government bond yields fell in the periphery and debt issuance in January went remarkably well, particularly for Spain and Italy. Has the LTRO fundamentally changed the likely path forward in the EZ crisis?

The EZ crisis is a debt crisis, a fiscal crisis, a financial crisis and a political crisis, but above all else it is a growth crisis. The only way the LTRO could help to end this crisis is if it were to mitigate the contraction in GDP the EZ is facing or stimulate growth. As Rebecca Wilder (@newsneconomics) has explained in a recent blog post, the three year LTRO is one in a series of steps the ECB has taken to plug holes as deposits have fled from EZ banks and private repo funding markets have dried up. Den Rest des Beitrags lesen »

THE battle over RBS CEO Stephen Hester’s pay has absorbed an awful lot of weekend press and media in Britain – one might call it a bout of Hesteria. Mr Hester has sensibly backed away from his bonus, since the position of “banking public enemy” is not one to be relished – ask Sir Fred Goodwin.

There is a defence to be made of the bonus. Mr Hester did not create the mess at RBS; he is clearing it up. If he can remodel RBS and return it to the private sector, he will have delivered value to the taxpayer that could be in billions – in other words, more than a thousand times his bonus. If he walks away from the job, the public might lose a lot more than the £1m (in shares, not cash) that he was due to receive. By all accounts, he is a good manager and has made a decent fist of shrinking RBS’s giant balance sheet.

Politically, however, the problem is that Mr Hester is working for a (largely) state-owned company at a time when other public sector employees are suffering a wage freeze, benefits are being cut and so on. Den Rest des Beitrags lesen »

LONDON—Consumers and service providers in the euro zone head into February more upbeat about their prospects, a development that suggests the currency area’s economy may be stabilizing.

The European Commission Monday said the overall measure of business and consumer confidence in the 17 countries that share the euro—-known as the Economic Sentiment Indicator—rose to 93.4 in January from 92.8 in December. However, that outcome was weaker than the 93.6 forecast by economists and there was significant divergence between countries.

Although official figures will only be released on Feb. 15, many economists believe the euro-zone economy contracted in the fourth quarter of 2011.

But recent evidence suggests that the economy may have stabilized at the start of the year, and the confidence survey is consistent with that view.

Together with other surveys, it may help persuade the European Central Bank to leave its monetary policy unchanged when its governing council meets next month.

The survey came as new data indicated Germany’s consumer price inflation slowed in January on the year according to a preliminary reading, in line with expectations, leaving intact forecasts that the slowdown in euro-zone inflation will continue. Den Rest des Beitrags lesen »

‘Don’t Overestimate the Fiscal Pact’

In a SPIEGEL interview, Austrian Chancellor Werner Faymann, 51, expresses doubt about Germany’s strategy in combatting the euro crisis, discusses the potential need for a larger Greek bailout package and says that the ECB may have to contribute to debt relief for Athens.

SPIEGEL: Mr. Chancellor, head of the International Monetary Fund (IMF) Christine Lagarde has demanded that the permanent euro backstop fund, the European Stability Mechanism (ESM), be enlarged. German Chancellor Angela Merkel thinks this is unnecessary. Who is right?

Faymann: I certainly wouldn’t promise my parliament that we could get by on €500 billion. My government is prepared for the present EFSF bailout fund and the ESM to overlap in a way that we erect a higher firewall. My finance minister, incidentally, sees it that way too, and like Ms. Merkel, she belongs to the conservative European People’s Party. Den Rest des Beitrags lesen »

Communication by euro area Member States

Today, we have taken major steps in the implementation of our overall strategy to fight the crisis:
1. The Treaty on stability, coordination and governance in the Economic and Monetary Union
has been finalized. It will be signed in March. At the same time an arrangement will be
decided about the procedure to be followed to bring to the Court of Justice a case of noncompliance with the Treaty.
This represents a major step forward towards closer and irrevocable fiscal and economic
integration and stronger governance in the euro area. It will significantly bolster the outlookfor fiscal sustainability and euro area sovereign debt and enhance growth.
2. The Treaty establishing the European Stability Mechanism is ready for signature, and the
objective is that it enters into force in July 2012. This permanent crisis mechanism willcontribute to raising confidence, solidarity and financial stability in the euro area. It will have a wide range of tools available and a strong financial basis.
As agreed in December, we will reassess in March the adequacy of resources under the EFSF
and ESM.
3. Concerning Greece, we note progress made in the negotiations with the private sector to reach an agreement in line with the parameters agreed upon in October. Den Rest des Beitrags lesen »

Agreement on strengthening fiscal discipline and convergence

European leaders1(1 At an informal meeting of members of the European Council) agreed a new Treaty on Stability, Coordination and Governance aimed
at strengthening fiscal discipline and introducing more automatic sanctions and stricter
surveillance within the euro area, in particular by introducing a “balanced budget rule”.
According to the new “fiscal compact” treaty, national budgets are required to be in
balance or in surplus, a criterion that would be met if the annual structural government
deficit does not exceed 0.5% of nominal GDP. This balanced budget rule must beincorporated within one year into the member states’ national legal systems, atconstitutional level or equivalent.In the event of deviation from this rule, an automatic correction mechanism would be triggered. It will be defined by each member state on the basis of principles proposed by the European Commission. Den Rest des Beitrags lesen »